Cracking the challenging European market

In the busy streets of Europe, it's not unusual to see a piece of Canada roll by on two wheels.

Bicycle carriers made by Calgary-based Chariot Carriers Inc. are the preferred method for carting kids around town for many European parents. Instead of bundling everyone into the car for errands, moms and dads instead hop on their bikes and pull their kids - and groceries - behind them in one of the sturdy carts.

The well-established biking culture in countries such as Switzerland and Germany provided a golden opportunity for Chariot Carriers, significantly widening the market for its products. In many parts of Europe, people use their bikes and Chariot carts as part of everyday life, in contrast with North America where family biking tends to be a weekend activity.

In the 13 years since Chariot expanded to Europe, that market has grown to account for nearly 40 per cent of the privately held company's annual revenue (Chariot says its total sales are in the $20-million to $50-million range). But stacks of Swiss francs and euros aren't the only things Chariot has brought back from abroad: Valuable feedback from European customers has helped the company fine-tune its products for the North American market, according to founder Dan Britton.

"Without overstating it, it's been really critical for our business," said Mr. Britton, 44, who owns the company with his older brother, Chris, who is 48. "If we didn't go [to Europe] ... we'd be a much different company. It's been critical, vital - it's been key to our growth."

Chariot focused on Canada in its first years, reaching sales of 3,200 trailers by 1994, and then began moving into the U.S. market. In 1997, Chariot entered Germany, its first European market.

Looking back, Mr. Britton said he is pleased the company didn't put Europe on the back burner to focus solely on the U.S. market, as many Canadian companies often do.

Canadian exporters sent about $25-billion worth of goods to the European Union in 2009, a figure far overshadowed by the $270-billion worth of Canadian products sent to the United States, according to Statistics Canada.

There is good reason to target the United States, of course. The geographical proximity, shared language and similar culture, and the North American free-trade agreement all make it an agreeable place of business.

"There has been a tendency for Canadian companies to 'take the easy way out' and focus mostly on their next-door neighbour and not look at some of the other big markets that are out there," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns. "You can certainly understand why there was so much focus on the U.S. We've come off a period of 25 years where the U.S. consumer regularly churned out solid gains year-in, year-out ..."

But that country's economic woes may be changing the way Canadian business leaders view Europe, experts say. The continent is more challenging, with its web of languages, and different legal and regulatory systems, but it is nevertheless a very large and stable market.

"I think the U.S. consumer is not going to come roaring back any time soon," Mr. Porter said. "Increasingly, Canadian companies will almost be forced to look further afield and look seriously beyond the U.S. market."

Export Development Canada, which provides financing and other services for Canadian exporters, is preparing for such a possibility. The agency is slated to open an office next month in Dusseldorf, Germany - its first in Western Europe - to ensure more Canadian-made products end up in Europe.

"Wise Canadian companies are realizing they need to diversify their export markets to recover from and insulate themselves from economic shock," said Kim Lok, the EDC's regional manager of Europe. "We think there are a lot of important global European companies that Canadians could, and should, be more engaged with."

Doing so often requires a different approach than at home. Chariot, for example, sells directly to Canadian retailers. But for the European market, it opted to farm out distribution to German family-biking specialist Zwei plus zwei, a move that proved invaluable for Chariot's expansion.

Zwei plus zwei had the local knowledge that Chariot lacked, allowing the company to enter the market sooner than if it had opted to go it alone, according to Mr. Britton. Chariot also received crucial feedback from Zwei plus zwei that resulted in crucial tweaks to its products, such as making them waterproof and adding accessories such as roof racks.

The co-operation also created a new revenue stream. The two companies co-developed another brand of bicycle trailers called Croozer, a more mainstream version of Chariot's premium carts. Zwei plus zwei sells Croozer in Europe, while Chariot sells the brand in North America, Asia and Australia.

Chariot has had its challenges in Europe. For example, the booming Alberta economy at one point made it difficult to keep employees, making it hard to keep up with demand from European customers. That led to lots of overtime for the remaining staff and the forfeiture of margins. But Chariot's distributor stuck by them.

"If you don't have a good relationship, trust and willingness with a long-term commitment, you don't do those kinds of things," Mr. Britton said. "The partners are willing to do what it takes, and we are as well." Chariot plans to continue its European expansion. While some markets were easy to crack (Germany, Switzerland, the Netherlands), other such as Italy, France and the U.K. are still a challenge, in part because of laws and congested cities.

Mr. Britton recently stepped aside as the company's chief executive officer, in part because he recognized that Chariot needed an experienced professional to take it to the next level of growth. He will focus on his main passion - product development - while business consultant Pierre Doyon takes the reins as CEO.

"The company has become bigger than I expected," Mr. Britton explained. "We want to keep growing, we want to become a stronger company, a better company."

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Doing business in Europe

The European Union is Canada's second-most-important trading partner after the United States, with bilateral trade in goods alone worth more than $54-billion. Here's a snapshot from 2009:

Goods

$24-billion / Canadian exports to the EU

$30.2-billion / Canadian imports from the EU

Services

$10.8-billion / Canadian exports to the EU

$14.1-billion / Canadian imports from the EU

Foreign direct investment

$20.6-billion / Canadian investment flows to the EU

$10.5-billion / EU investment flows to Canada

Source: European Commission

Directorate-General for Trade